Saturday, September 24, 2005

Subpoena: Hard to Spell, Harder to Spin

A spokesman said Frist's office has been contacted by both the SEC and the U.S. attorney's office in Manhattan about his divestiture of the stock. HCA disclosed separately that it was subpoenaed by the same U.S. attorney's office for documents that were related to Frist's sale. Frist and HCA said they are cooperating.Historians said they cannot recall any other congressional leaders who have faced federal inquiries into stock sales. Frist has denied any wrongdoing.

These investigations turn on details such as the timing of disclosures. Mistakes, inconsistencies and misstatements of facts tend to multiply in significance as investigators review the documents:

Separately, documents unearthed yesterday by the Associated Press showed that Frist was told about stock trades in his blind trust. In documents filed with the Senate, trustee M. Kirk Scobey Jr. told Frist in 2002 that HCA stock had been transferred to his trust. Scobey, reached by phone last night, declined to comment.The AP said that the documents disclosed that HCA stock worth hundreds of thousands of dollars was placed into Frist's blind trusts several other times in 2002 as well. Frist maintained in a television interview in 2003 that he did not know how much HCA stock he owned, if any.

Mr. Frist's decision to sell represented a departure from his previous position that his lack of control over the blind trusts that held his assets almost eliminated any conflict of interest. The Frist transaction also followed several months of heavy selling by many top executives inside the company as the stock reached its new peak, raising questions about whether Mr. Frist was following their lead."Right now, I don't know if I own HCA because it's a qualified blind trust," Mr. Frist told The National Journal two years ago.

Senate ethics rules and federal ethics laws allow members to own stocks and other assets directly, without putting them in trusts. Provisions in the ethics laws, however, allow government officials to create "qualified blind trusts." In such trusts, according to the rules, an appointed trustee manages the fund and communications with the official are strictly limited. Such arrangements are intended to minimize allegations of conflict of interest.The law explicitly allows the official who created the trust to give "directions to the trustee to sell all of an asset initially placed in the trust" if the official determines that holding on to the asset creates the appearance of a conflict of interest, according to the Senate ethics manual. The rules also require the trustee to tell the official if all of one of the original assets is sold...."Bill Frist has this all upside down," said Rep. Rahm Emanuel (D-Ill.), chairman of the House Democrats' campaign committee. "He thought Terri Schiavo could see and his trust was blind."